Trickle Down Election Economics: How Big Money Can Affect Small Races

At a press event in Kingston, New York, a Hudson Valley community about 90 miles north of Manhattan, the local Democratic congressional candidate, Zephyr Teachout, earlier this month called for a debate. But not with her Republican opponent, John Faso.

Instead she issued the challenge to two high-rolling hedge fund bosses who back him.

"These two New York City billionaires, Paul Singer and Robert Mercer, have put $1 million together into the super PAC supporting my opponent," she said. "The voters deserve to hear directly from the billionaires backing John Faso about what they expect to get from him in Congress.

"When someone writes a $500,000 check they don't do it out of the goodness of their heart, continued Teachout, a Fordham University law professor who literally wrote the book on political quid pro quos: In 2014, her Corruption in America: From Benjamin Franklin's Snuff Box to Citizens United, laid out a strong argument for what she calls "prophylactic" anti-corruption laws that focus on preventing the circumstances that give rise to corruption rather than prosecuting it after the fact.

"These are people probably trying to buy power, and voters should know who they are and what they stand for," she said in Kingston. "I'm challenging Paul Singer and Robert Mercer to put your mouth where your money is and debate me directly, not through your mouthpiece." Her supporters echoed her, reversal of the familiar adage: "Put your mouth where your money is!" they chanted.

Teachout's race for New York's 19^th Congressional District, an open seat, highlights two important factors that are easily overlooked in a year when most of the political attention will be focused on the incendiary presidential race between Hillary Clinton and Donald Trump:

• First, the importance of the so-called "down-ballot" races for seats in the US Congress and state legislatures.
• Second, the likelihood that massive amounts of outside money, some of it untraceable to its source, will be brought to bear to sway the outcomes.

Although New York is not expected to be a presidential battleground this year (the state's historically Democratic tilt making Clinton, who represented New York for two terms in the US Senate, the odds-on favorite to beat Manhattan real estate mogul Trump), the respected political handicapper Charlie Cook rates five of the state's congressional races as tossups: the 1^st, the 3^rd, the 19^th, the 22^nd and the 24^th Congressional Districts. Three of those contests are for seats opened up by the retirements of incumbents. Only one of the seats is currently occupied by a Democrat.

In addition, the chance of winning decisive control of the state Senate, where the political balance has been teeter-tottering between the two parties, will raise the stakes in a number of close contests for seats in the legislature's upper chamber.

New York political battlegrounds tend to cluster: competitive state legislative races often overlap with those for the US House. What follows is a closer look at a couple of the hot spots, along with the issues and the money that could impact the outcomes:

Hudson Valley

The 19^th District spans the width of the Hudson Valley, from Connecticut and Massachusetts to Pennsylvania, but was drawn to leave out cities including Poughkeepsie, Newburgh and Beacon to the south, and Albany to the north, though it extends below and above them on either side. Teachout and Faso are vying for the seat currently occupied by retiring Republican Rep. Chris Gibson.

Endorsed by Bernie Sanders, Teachout garnered hundreds of thousands of dollars in donations from the senator's campaign email list, but she expects that to be far outstripped by the outsider funders backing Faso. "What are Paul Singer and Robert Mercer doing spending basically three times the cost of most people's houses on a Hudson Valley race?" she asked.

Singer, a Republican mega-donor who refused to take part in the Republican National Convention because he opposes Trump, spent more than $5 million backing Marco Rubio's unsuccessful bid the for the GOP nomination; fellow hedge fund manager Robert Mercer, spent some $11 million on a super PAC backing the Republican presidential bid of Sen. Ted Cruz of Texas. Between the two of them, the financiers provided the lion's share of the more than $900,000 the super PAC dubbed New York Wins, spent to submarine Faso's Republican primary opponent,the pro-Trump Andrew Heaney.

"The dynamic we see in these state Senate races are billionaires from Greenwich, Connecticut and Park Avenue giving half a million dollars to try to swing a state Senate race in the Hudson Valley," says Michael Kink of Strong Economy for All, a coalition of labor and community groups. "There are just not a lot of billionaires in these areas and the idea that the billionaires are funding these elections suggests that those policies are not going to benefit the vast majority of people in those areas."

Several competitive state Senate races overlap with or border the 19^th District. The 46^th Senate District is currently occupied by Republican George Amedore, the vice president of a construction company. He's being challenged this year by Sara Niccoli, a town supervisor from the town of Palatine. She lives on the farm where her husband grew up. When she ran for local office, Niccoli says, "I was sure I wouldn't win because I'm a Democrat and it's a very Republican town, but I really got into it, I loved knocking on doors and talking to people around the community and so I won."

In local elections, Niccoli notes, there was often only one person on the ballot, on the Republican line. "You could either vote for that person or no one, or write in someone." For her, that was unacceptable. In deciding to run for the state Senate, what motivated her was the disparity between her daughter's school and those in wealthier districts.

Education is key to these races because a lot of the big money flowing into them comes from charter school backers, who push for Albany's continued funneling of public money to privately run charters, most of which are located in New York City. Paul Singer gave $500,000 each to two super PACs, New Yorkers for a Balanced Albany and Balance New York, in 2014. Balance New York spent heavily to elect Amedore that year. (Charter school money is often bipartisan; Gov. Andrew Cuomo has benefited from it in the past.) New Yorkers for a Balanced Albany, founded by the corporate education reform group StudentsFirst, also targeted Democratic state legislative candidates in 2014.

Meanwhile, the public schools are suffering, and not just in New York City or in communities of color. Niccoli isn't the only one seeing that. "You have lots of tiny rural districts around the state and those school districts have a lot of poverty, a lot of need and very little money locally," says Billy Easton, executive director of the Alliance for Quality Education, a labor-affiliated organization.

Running a competitive race with small dollars, Niccoli says, "is just nonstop work -- it's telephone calls and emails and letters to everybody who I've ever met in my entire life. I will always always remember the person who says 'yes, I really want to support your campaign but I'm just waiting for my SSI check to come in, I'll give you $5.' I think that's as it should be in some ways; campaigns should be funded by regular people, experiencing life in their communities. They should not be funded by big corporations who establish multiple LLCs."

The LLC loophole is one of the most common complaints from those who would reform Albany. Lawrence Norden of the Brennan Center's Democracy Program describes how it works: "The Board of Elections currently classifies limited liability companies (LLCs) as individuals rather than 'corporations' or 'partnerships,' as they are treated under federal law. While most corporations can give no more than $5,000 every year, each LLC can give at the much higher limits permitted for individuals. Worse still, individuals with multiple LLCs use them to evade contribution limits entirely. And since LLCs need not disclose the identities of their members or officers, we often don't know who is behind these sums of money."

Norden cites the example of a single developer who used 27 different LLCs to donate over $4 million to PACs. He donated more than $1 million to both Gov. Cuomo and the state Senate Republican Campaign Committee.

Fighting uphill battles alongside Niccoli are Terry Gipson and Chris Eachus in the 41^st and 39^th Districts, respectively. Eachus knows the public school fight firsthand, as a retired teacher at Newburgh Free Academy in Newburgh, New York, a small, poor city with a large population of Latino and black residents. Newburgh was one of several small cities named in a recent lawsuit known as the "small cities" case, challenging New York's funding for public schools and its failure to live up to the 2006 Campaign for Fiscal Equity ruling. He's challenging 88-year-old William Larkin Jr., who is running for his 14^th Senate term. Eachus ran in 2012 against Larkin and says he was outspent 3 to 1. "Everybody wrote that district off and it was a mistake, it would've been a different outcome I think if people had paid attention," Easton says.

Gipson, a resident of Rhinebeck, was the senator for the 41^st district from 2012 to 2014 but lost his re-election bid and aims to take the seat back from Sue Serino, the Republican who beat him. He too has made campaign finance and corruption an issue in his race, writing a letter to Gov. Cuomo in June asking him to call the legislature back in to close the LLC loophole and pass campaign finance reform. "As a former New York State Senator...I refused to help the New York City Real Estate Board get tax breaks to build luxury condominiums for Wall Street billionaires. REBNY retaliated by spending millions of dollars in support of my opponent, because the laws allowed them to do so," he wrote.

In all these races, as the election nears and the polls tighten, the candidates expect to see big donations coming. "I think one of the reasons that I was able to outraise my opponent is that he doesn't really have to work for the money, it will come in in large amounts when he needs it," Niccoli says. "What we'll see in this campaign is he'll saturate television and radio networks, everything through the airwaves will be negative on me but what I can do in response is get out on the ground."

Long Island

After announcing he would not seek re-election this year, Rep. Steve Israel (D-NY) -- representing the 3^rd Congressional District -- followed it up with a tell-all New York Times op-ed, explaining that he was tired of the endless money race. "The romance was crushed by lesson No. 1: Get re-elected. A fundraising consultant advised that if I didn't raise at least $10,000 a week (in pre-Citizens United dollars), I wouldn't be back," he wrote. "Since then, I've spent roughly 4,200 hours in call time, attended more than 1,600 fundraisers just for my own campaign and raised nearly $20 million in increments of $1,000, $2,500 and $5,000 per election cycle. And things have only become worse in the five years since the Supreme Court's Citizens United decision, which ignited an explosion of money in politics by ruling that the government may not ban political spending by corporations in elections."

Israel may have been tired of the game, but there was plenty of interest in replacing him. Tom Suozzi, a former Nassau County Executive, won the Democratic primary; he will face off against current State Sen. Jack Martins, a Republican and Libertarian Michael McDermott.

Martins' open 7^th Senate District also becomes a target for a potential flood of money. Democrat Adam Haber, a former school board member who challenged Martins in 2014, leads so far in the fundraising race over Republican nominee Elaine Phillips, mayor of the village of Flower Hill.

Long Island's state Senate districts are deeply gerrymandered: Most communities of color are split across several state Senate districts, including the 7^th and the 6^th.

In the 6th, Republican incumbent Kemp Hannon is fighting to maintain his seat in the legislature, where he's served since 1977. The head of the Senate Health Committee, Hannon has drawn fire in the past for having investments in companies under his committee's purview and for getting campaign donations from the medical industry. "Hannon has been getting a lower and lower percentage of the vote," in recent years, says Kink of Strong Economy for All. "There's going to be continued interest in what he's doing for regular people versus what he's doing for billionaires and big corporations." Hannon will face a rematch with Ryan Cronin, an attorney who represented financial fraud victims and positions himself as a reformer. Cronin lost to Hannon in 2012, but by less than 4 percent of the total vote.

The fact that Haber and Cronin are competitive represents a sea change: Before last spring, every single state senator from Long Island was a Republican. Then the corruption investigation roiling Albany took out Senate Majority Leader Dean Skelos, sentenced to five years in prison alongside his son for bribery, extortion, and conspiracy. Skelos had represented the 9^th district for nearly 30 years, and had managed to maintain control of the Senate majority by hook or by crook, but his conviction left an opening for a Democrat with a strong anti-corruption message, and Todd Kaminsky, a former assistant US attorney who had famously prosecuted former Senate Majority Leader Pedro Espada in 2012, won a bruising special election in April.

Corruption and blatant dealmaking, Kaminsky argues, is at the heart of the disgust for Albany that he hears about in his district. "It's not really a partisan issue," he says. "I'm a Democrat but I mostly prosecuted Democrats; it's not about party, it's about people in power liking the system as it is and not wanting to make changes."

The special election Kaminsky won last spring provided a sneak preview what could happen this fall. Kaminsky saw a media blitz against him in the few weeks right before the election. "They reached a saturation level on broadcast television, which is a difficult thing to conceptualize," he says. "There were people in New Jersey, in upstate New York, in the city, way further out of a state Senate district that is only in Nassau County. They had so much money they could afford to spend it in frivolous ways that didn't even impact the election."

New Yorkers for a Balanced Albany, the pro-charter school group, dropped near $1.5 million on the race, nearly half of the total spent on the election. Despite the group's education connection, Kaminsky notes, most of the ads it ran accused him of wanting to raise taxes and tried to tie him to New York City Mayor Bill de Blasio. "These things aren't supposed to be coordinated between the party and the independent expenditure group," Kaminsky notes, "but it was the same message that the opponent's campaign was saying and it was done at a very opportune time for the opposition."

He's girding for more of the same this fall as he seeks election to a full term. "I know that [New Yorkers for a Balanced Albany] have reloaded and have almost $3 million back in the same independent expenditure account, whether they target me or target a different race remains to be seen," Kaminsky says. "Obviously there's very little you can do to prepare yourself for $1.5 million in negative advertising. But you have to be prepared."

The message that Kaminsky was in league with de Blasio isn't a novel one in New York state politics, where the division between the city and everywhere else is often sharp. It's an accusation that flies in the Hudson Valley as well as on Long Island. The irony is that the very people spending heavily to spread that message usually themselves are not from the districts in which they're dropping thousands of dollars. "It's extremely disingenuous and misleading to try to portray some of these upstate or even Long Island candidates as somehow beholden to New York City when the fact is that the people financing these attack campaigns are largely from New York City," says Billy Easton. "What they're failing to talk about is that the same incumbent senators who are benefiting from all this political campaign largesse from these Wall Street types are also actually standing in the way of adequately funding their own schools."

In particular, the charter-school affiliated groups that spend so heavily outside of NYC are mostly advocating for more money to flow into their schools -- almost all of which are located in the city.

Real estate money also flows freely on Long Island, notes Lucas Sanchez, Long Island Director of New York Communities for Change, mostly to prevent more regulation around affordable housing but also to prevent higher taxes on the wealthy. NYCC members, mostly from communities of color in the city and on Long Island, have to challenge the heavy spending with on-the-ground organizing. "We need senators who will represent the people who are living here -- not wealthy Wall Street interests -- and our members are doing everything they can to ensure their voices will be heard in November," Sanchez says.

Another potentially tight race has emerged in Long Island's 1^st Congressional District, where Anna Throne-Holst, a Southampton town supervisor and one of very few Democratic elected officials in her part of the island, is running against incumbent Lee Zeldin. Between them the two candidates already have spent more than $2 million. So far, Throne-Holst has had the most help from super PACs, but New York Wins, the group underwritten by Singer and Mercer, has surfaced in a small way on Zeldin's behalf.

Upstate

A couple of upstate state Senate districts also merit watching:

The 58^th District, currently held by Republican Tom O'Mara, who is being challenged by attorney and longtime Democratic party activist Leslie Danks Burke, and the 60^th, where Amber Small, a civic activist with witty campaign slogans like "Think Big, Vote Small," and "Cutting the Crap [out of our water]" originally filed to oust state Sen. Mark Panepinto, a fellow Democrat. Then Panepinto announced that he would not seek re-election -- as questions swirled about his ethics and behavior. Small now faces Republican Chris Jacobs, the Erie County Clerk and member of the Jacobs family, which owns the Boston Bruins hockey team and the Delaware North Companies.

The only thing that's certain is that with several tight House races and the fate of the state Senate in the balance, big money is sure to flow. To combat it, community organizations will be out on the ground and a group of activists are working to direct some of the money heading into headline-grabbing races toward grass-roots get-out-the-vote work and longer-term community organizing. "We are making a larger argument that funding grass-roots organizing is a better bang for the buck than TV ads or super PACs," Billy Wimsatt of Movement 2016 says. "The beauty of funding local groups that do vote work is it's not just about one candidate or one election, it's about building people power to organize in the community and make the community a better place."